The Medicare Prescription Payment Plan: Considerations For Upcoming M3P Compliance
Posted on June 26, 2024
M3P deadlines are approaching fast, but plans can prepare for M3P compliance in several ways.
As part of the Inflation Reduction Act (IRA), Congress enacted a new Medicare prescription drug program called the Medicare Prescription Payment Plan (M3P). The purpose of M3P is to eliminate point-of-sale pharmacy cost-sharing for Medicare beneficiaries enrolled in the program and spread those costs throughout the year in monthly installments paid directly to the plan. M3P is expected to make Medicare Part D more affordable and predictable to Medicare beneficiaries.
Starting October 15, 2024, Medicare Advantage Prescription Drug plans (MAPDs) and Prescription Drug Plans (PDPs) must allow current and prospective members to enroll in the Medicare Prescription Payment Plan for the 2025 plan year. All other M3P requirements become effective on January 1, 2025.
What is the Medicare Prescription Payment Plan (M3P)?
The Inflation Reduction Act (IRA) includes a redesign of the Medicare Prescription Drug Benefit. The IRA set a $2,000 annual out-of-pocket maximum for all Medicare Part D enrollees, and eliminated the doughnut hole (or coverage gap). Catastrophic coverage begins when enrollee out-of-pocket costs reach $2,000. Enrollees pay $0 once they reach the catastrophic phase until the end of the plan year.
The new Part D out-of-pocket threshold is about $2,000 less than previous years (2006 -2024). If spread across 12 months, enrollees would pay an average of $1661 monthly. This is less than what many beneficiaries pay monthly under the current Part D design. This framework makes M3P possible. Instead of paying variable copays and coinsurance at the pharmacy counter when the prescription is filled, Medicare beneficiaries can pay a capped monthly payment directly to their health plan, just like a premium.
M3P is designed to make prescription drug costs predictable while lowering out-of-pocket costs. It functions like a layaway plan for prescription drugs where Medicare enrollees pay in monthly installments. M3P is not a loan or other line of credit, and plans may not charge interest or late fees. Plans cannot report late or non-payment to any credit bureau. Additional beneficiary protections include:
- A flexible enrollment window (through November annually)
- Enrollee-selected billing dates based on individual choice
- Ability to start, stop, and restart M3P as needed through the end of the plan year
- Multiple payment methods (credit/debit card, EFT, check) and means of payment (online, mail)
- Digital access to account administration, information, and payment
Part D sponsors must provide the option to elect into the Medicare Prescription Payment Plan (M3P) to all Part D enrollees, including Part D enrollees who are LIS-eligible.
CMS Medicare Prescription Payment Plan Part 1 Guidance
The Centers for Medicare & Medicaid Services (CMS) is accountable for regulating M3P. To that end, CMS has issued several guidance and draft materials for public comment. In the Medicare Prescription Payment Plan Final Part One Guidance, CMS addresses key technical and operational requirements. CMS intends to publish a final Part Two Guidance document in the summer of 2024. The Part Two guidance focuses on outreach, education, pharmacy processes, and CMS oversight.
| Key Medicare Part D Plan Requirements in Law and Rules | |
| IRA M3P Statutory Requirements | CMS Final Part One Guidance |
| Applicable to all Part D sponsors (PDP, MAPD, EGWP, cost plans, demonstration plans and all Medicare Part D enrollees, includingLIS and non–LIS members) | Acknowledges “no practical application” to PACE and Medicare-Medicaid Plans (MMPs) with no Part D cost sharing but is silent on $0 DSNPs |
| Applicable to all covered Part D drugs | Accept M3P enrollment requests from current and newly enrolled members between 10/15 and 12/31 each year Process election requests received during the plan year within 24 hours |
| Have a mechanism to notify a pharmacy when an enrollee is enrolled in M3P or likely to benefit from M3P | Proactively notify enrollees “likely to benefit” from MP3, which CMS defines as any enrollee with any single $600 Part D-eligible prescription |
| Pharmacies must tell enrollees when they have a claim that makes them likely to benefit from M3P | Notify prospective members of the M3P program through promotional materials |
| Allow M3P enrollees to pay the plan monthly installments up to a capped amount | Follow NCPDP M3P transaction requirements, including using COB to ensure enrollees are charged $0 at the pharmacy |
| Unsettled balances are plan losses unless they were assumed as losses in the plan bid | Use a unique M3P Bank Identification Number (BIN) and/or Processor Control Number (PCN) to ensure program participants are charged $0 at the pharmacy |
| Promptly pay pharmacies in full for drugs dispensed to MP3 enrollees (net of supplemental payer costs) | Follow M3P billing instructions, required content, and notices This includes observing a grace period for enrollees if a monthly bill has not been paid on time |
| Have a financial reconciliation process in place to correct enrollee payment inaccuracies | Process enrollee M3P disputes as grievances |
CMS plans to issue more guidance in the coming months. The Final Part Two Guidance and final versions of CMS model communications are slated for release in the summer of 2024. CMS is also making final versions of the M3P reporting requirements and technical changes to the prescription drug event (PDE) record layout.
What is the expected impact of the Medicare Prescription Payment Plan (M3P) on Medicare Part D sponsors?
As of February 2024, CMS reports there are 54 million Medicare beneficiaries enrolled in the Part D program. They, and others aging into the program, will be able to elect M3P enrollment starting October 15, 2024.
CMS has set a $600 prescription threshold for identifying “likely to benefit” enrollees. CMS estimates that 6% of Medicare beneficiaries are likely to benefit. Plans, pharmacy benefit managers (PBMs), and independent M3P vendors estimate that 5% to 10% of eligible beneficiaries will enroll in M3P.
Because 2025 will be the inaugural year of this benefit, the government and private sector can only estimate the M3P enrollment rate. However, there are a few factors we expect to influence M3P enrollment.
Knowledge
Enrollee adoption will be influenced by advertisement, education, and word-of-mouth. In an election year, politicians who voted for the IRA and are up for re-election are already talking about how they have lowered drug costs. It remains to be seen if M3P will be mentioned directly by politicians. However, CMS has committed to a public education campaign for the fall of 2024. CMS also requires Part D plans to educate pharmacies, providers, and enrollees, including direct outreach to enrollees that meet the CMS “likely to benefit” threshold. Be it person-to-person or online through social media, consumers are sharing their experiences, likes, and dislikes. Growing awareness of the program is expected to also increase its use.
Finance
Enrollee adoption will be influenced by personal economics. Medicare beneficiaries generally live on fixed incomes. However, beneficiaries do not need to be on a fixed income to benefit. Savvy enrollees will calculate “being likely to benefit” differently than CMS. For example, someone taking five brand and generic prescriptions each month has an incentive to voluntarily enroll if their average monthly out-of-pocket cost is less than the $166 monthly M3P payment ($2,000 divided by 12 months).
Low-Risk
Enrollees face limited risks trying M3P. There are no financial penalties for enrollees who may fail to pay their M3P balances. Plans are permitted to attempt to obtain payment, with guardrails placed by CMS on collection procedures. The IRA also allows plans to deny enrollees from enrolling in M3P the following year if they fail to pay. With that said, enrollees can join a different Part D plan during the annual election period, thus negating the effect of the prior plan’s decision. Plans must also weigh the impact of M3P repayment policy on their Star Ratings. Collections can lead to complaints. Enrollees’ satisfaction with how their plans treat them during financial disputes will be reflected in the Consumer Assessment of Healthcare Provider and Systems (CAHPS) Survey results. Medicare Advantage Plans with high Star Ratings depend on the CMS Quality Bonus Payment, and have to calculate the cost-benefit of repayment efforts. CMS allows enrollees to turn M3P on and off as they need based on their financial needs. Enrollees can choose the dates they wish to pay the monthly amount.
How are Medicare plans preparing for the Medicare Prescription Payment Plan (M3P)?
Effective January 1, 2025, enrollees will pay $0 cost sharing once they reach the catastrophic phase until the end of the plan year. At the same time, Part D plans will become accountable for 60% of drug costs in the catastrophic phase. This is a massive change since CMS reinsured 80% of drug costs in that phase for the first 18 years of the Medicare Prescription Drug Benefit. Notably, the $2,000 ICL is over 50% less than the 2024 catastrophic limit of $5,030. In other words, Part D plans will begin absorbing two-thirds of catastrophic drug costs at an earlier phase than CMS did for almost two decades.
With so many complex requirements and pressures, Part D plans have their work cut out in preparing for the M3P October 15th and January 1st go-live dates. Chief among these concerns has been deciding whether to build an M3P solution, rely on their PBM’s M3P solution, or to delegate the process to another vendor.
PSG has helped plans determine their preferred course of action in partnership with PBMs and independent M3P solution providers. PSG is also supporting implementation efforts that are underway. The industry’s reaction to M3P is diverse and evolving. New partnerships, new systems, and new approaches will impact millions of Medicare beneficiaries.
Reach out to learn more about how PSG can help with your M3P needs.
- Actual calculations vary. Details on various payment calculations and scenarios can be found in the Part 1 Guidance
